The company was established first by August Horch and his first business partner Salli Herz on November 14, 1899 at Ehrenfeld, Cologne.[1] August Horch was a former production manager for Karl Benz. Three years later in 1902 he moved with his company to Reichenbach im Vogtland. On May, 10th, 1904 he founded the Horch & Cie. Motorwagenwerke AG, a joint-stock company in Zwickau (State of Saxony). The city of Zwickau was the capital of the South Western Saxon County and one of Saxony's industrial centres at that time.

After troubles with Horch chief financial officer, August Horch founded on July 16, 1909, his second company, the August Horch Automobilwerke GmbH in Zwickau. He had to rename his new company because Horch was already a registered brand and he did not hold the rights on it. On April 25, 1910 the Audi Automobilwerke was entered in the company's register of Zwickau registration court. Audi is the Latin translation of horch, from the German verb "Horchen", which means "Listen" (compare English "hark"). The Audi name was proposed by a son of one of his business partners from Zwickau.[2]

The first Horch had a 4.5 hp (3.4 kW; 4.6 PS) engine, with an alloy crankcase, a unique achievement in those days. It had an open-body design, with lighting provided by lanterns with candles in them. In contrast with the powerful cars of later years, the first Horch could barely reach a top speed of 32 km/h (20 mph). It was significant at that time because it used a friction clutch, and also had a drive shaft to power the wheels.

The firm soon ran into financial troubles, not surprising considering the pioneering nature of the automobile business at that time. Horch had to seek new partners.

On March 1902, August Horch produced a 20 hp (15 kW; 20 PS) four-cylinder car with a shaft drive in Reichenbach in Vogtland. Horch cars were considered[by whom?] more advanced and superior to those being then built by Mercedes or Benz (who were then separate manufacturers).

By 1903, Horch had built a car with a four-cylinder engine. In March of the following year, he introduced his new car at the Frankfurt Fair.

In 1904, August Horch developed the first six-cylinder engine, which appeared in 1907. In 1906 a Horch automobile driven by Dr. Rudolf Stöss from Zwickau won the Herkomer Competition (equivalent to a 'brand-name' world championship at the time). In the 1920s, Moritz Stauss, a cosmopolitan Berliner, was the principal stockholder of the Horch company. He succeeded in making the Horch brand highly desirable by introducing art into the advertising of their products. He recognized that only a brand emphasising Horch's unique characteristics would be successful.

In 1923, Paul Daimler (a Stauss associate) worked for Horch as the chief engineer for 8-cylinder engines. Horch vehicles were subsequently the first to introduce 8-cylinder engines in series production.[citation needed]

In 1909, the supervisory board (the German equivalent of the Board of Directors) of the corporation forced out Horch. Horch went on to found Audi as Audiwerke GmbH, which became effective on 25 April 1910. The name was a solution to the legal dispute with his old company over use of the Horch brand and a clever play of words ("audi" is the literal Latin translation of the Old German "horch", meaning the imperative "Listen!").

In 1928, the company was acquired by Jørgen Skafte Rasmussen, owner of DKW (from the German Dampfkraftwagen, or steam engine vehicle) who had bought the remains of the US automobile manufacturer Rickenbacker in the same year. The Rickenbacker purchase included their manufacturing equipment for eight-cylinder engines.

Eventually, on 29 June 1932, Horch, Audi, DKW and Wanderer merged to form the Auto Union AG, Chemnitz affiliated group. The current Audi four-ring logo is the Auto Union logo that represents the merger of these four brands. In the 1930s, Horch introduced a new line of smaller and cheaper, but still presentable, V8 automobiles. In 1936, Horch presented the 25,000th 8-cylinder luxury car in Zwickau.

Auto Union became a major supplier of vehicles to the German Wehrmacht, such as Heavy standard passenger car (Horch 108), Medium standard passenger car (Horch 901 and Wanderer 901) and Half-trackSd.Kfz. 11. Civilian production was suspended after March 1940. After the war the Auto Union AG at Chemnitz was dissolved and in Ingolstadt, West Germany the new Auto Union GmbH was founded, where civilian car production continued. Due to widespread poverty in postwar Germany, only small DKW vehicles with two stroke engines were produced. After Auto Union was purchased in 1964 by the Volkswagenwerk AG, the old brand Audi was introduced again, together with the new four stroke vehicle Audi F103.

From 1955-1958, old Horch factories produced the Horch P240, a 6-cylinder car that was respected at the time. The former Horch and Audi operations from Zwickau were unified in 1958. A new brand, Sachsenring, within the East German corporation IFA was born. After unification in 1958, the P240 car was renamed as the Sachsenring P240. As the Soviet Administration inexplicably banned the foreign exportation of the P240, the East German economic administration decided to stop production of the vehicle. IFA also produced the initial Trabant "P-50" model from 1957.[3]

The Zwickau site was acquired in 1991 by Volkswagen, effectively restoring its connection with Audi.

On June 24, 2006, an incredibly rare 1937 Horch 853A Sport Cabriolet in original unrestored, unprepared condition sold at auction in Cortland NY for $299,000 US.[4]

In the late 1930s, Horch supplied a limited number of promotional scarves bearing the Horch logo. Sent only to the wealthiest drivers, it is a major collectible amongst diehard enthusiasts of the pre-war car era. However there is also a degree of controversy associated with these scarves as they were commonly sought by senior SS members.